What happens if the member of a SSAS dies?
SSAS death benefits explained

A comprehensive guide to Pensions and Investments for Investing in Property

An important question that many ask is ‘What happens if the member of a SSAS dies?’ Family members (and other dependants) can access the funds in a Small Self Administered Scheme (SSAS) if the member of the SSAS dies, but there are restrictions. It’s possible for a lump sum to be paid to a nominated beneficiary completely tax free, making an SSAS an excellent inheritance planning tool — if used properly.

However, this depends on specific circumstances, including whether or not the member has started drawing funds from the SSAS and how old the SSAS member was when they died.

Can a Family Member Access My SSAS if I Die before Drawing Funds?

Family members will be able to access a SSAS if a member dies before drawing the funds. The simplest option is to pay a lump sum to a person nominated in writing. Lump sums are typically free from all kinds of tax, including inheritance tax, income tax and pension tax. There is however, an exception: If contributions are made to the SSAS in the two years prior to death, as an attempt to reduce the SSAS member’s estate, this money may be liable for inheritance tax.

Alternatively, the amount can be paid as pension income to a dependant. In this case, income tax must be paid on the amount and the recipient must be a dependant.

If the SSAS member dies before drawing funds and was over 75, the benefits are paid out as if from a drawdown fund.

What Is a Drawdown Fund?

A lump sum paid out from a drawdown fund is taxed at 55%. You can pay anyone nominated in writing from a drawdown fund.

Money from a drawdown fund may be paid as income pension to a dependant as normal, which would be subject to income tax.

If you have no surviving dependants, the money from a drawdown fund may be paid to a nominated charity, without any tax deductions.

What’s the Lifetime Allowance?

The Lifetime Allowance is a limit on the amount that can be taken from a pension scheme, either as a lump sum or as retirement income, and can be paid without triggering an extra tax charge. The amount drawn from a SSAS — or paid as a lump sum to a beneficiary — is tested against the lifetime allowance. As of April 2019, the lifetime allowance in the UK is £1,055,000.

What Happens if a Member of an SSAS Dies While Drawing an SSAS Pension?

Each scheme will have a different arrangement in place in the event a member of the SSAS dies while drawing their pension. It’s possible to arrange a lump sum, a continuing pension income for a fixed time, or a dependant’s pension.

If a lump sum payment is arranged, this will be taxed at 55% and is limited to 20 times the amount of the original pension (minus the amount already paid to the SSAS member).

What Is a Dependant’s Pension?

A dependant’s pension can only be paid to someone who is a dependant of the SSAS member who died. A dependant may be a spouse, civil partner, common-law partner, a child aged 23 or under, anyone financially dependent on the SSAS member, or anyone who is dependent on the member due to physical or mental impairment.

A dependant’s pension is not tested against the Lifetime Allowance, but it is taxed at the appropriate rate of income tax to the recipient. A dependant can draw their pension in a number of different ways, including a capped drawdown, a flexible drawdown (only if they qualify for the scheme in their own right), a scheme pension, or a lifetime annuity.

How Does a Lifetime Annuity Work?

A lifetime annuity is a product that you can buy with your pension fund, which guarantees an income for life. If you’re a member of a SSAS and you’re drawing funds, you can use these funds to purchase an annuity. However, it’s vital you carefully check the terms of the annuity. When the recipient of an annuity dies, a lump sum may be paid to a dependant or there might be a minimum term of payments from the annuity to a dependant.

What our customers say...

  • An excellent service from Khaleda who took us through the process of setting up our SASS pension. We were fully advised on the whole process and kept up to date regularly with all questions being answered fully. We would highly recommend using Khaleda who we can’t fault. Brilliant

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    Jessett Simon Daisy
  • I’ve been working with The Landlord’s Pension this year to sort out historically messy pension arrangements and take control by creating a Family SSAS. Chris Brown has been an absolute pleasure to deal with, friendly professional advice all the way through. Thanks!

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    Ray Georgeson
  • I cannot recommend Lewis Jones from the Landlord’s Pension highly enough. His professionalism and knowledge of SSAS’s has been outstanding. He has guided me through the end to end process of setting up a SSAS to transfer my Pension into and has never complained when I’ve sent numerous emails with... Read more

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    Lissa Lowrie
  • Highly recommend The Landlords Pension for setting up a SSAS pension. Many Thanks to Liam, Michelle, Teresa and the team for their support throughout and making it an easy process. Looking forward to our working relationship with future investments.

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    Matthew Martin
  • Many thanks to Dan,Michelle and Teresa in helping me setup the SASS very supportive throughout the whole process
    Always happy to answers any questions and I look forward to working with them
    I couldn’t have done all this without The Landlords Pension
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    Angela Woods

The Landlord’s Pension is an expert in this niche sector of financial planning and have been helping clients to invest in property since 2004